Yesterday, after opening slightly lower, major US indices rallied throughout the session breaking a modest three-day pullback. Cyclical sectors moved higher after a much stronger than expected ISM Manufacturing survey. The S&P 500 closed up ~0.5% while the Dow Jones Industrial Average, small and midcap indices were all up ~1%.

Today things started well with a strong Asian session, but European equities faded from their highs. US markets followed Europe’s lead as futures were at highs but started to come in as we neared the Opening Bell. The S&P 500 began to slip just after trading began and continued fading for the rest of the morning. News of an update to Anthropic’s AI offering to include plug-ins for areas like Legal and Finance is diffusing across the market and adding to the broadside hits software names have absorbed over the past 6 months.

The S&P 500 is down ~1.5%. However, once again we’re seeing a difference below the surface and across the landscape. The equal-weight and small caps are outperforming. The real difference is in the Growth/Value factor. Large cap growth names are down ~2% while value is looking to hold flat. Small cap growth is also significantly trailing Small Value.

Tech is easily the worst-performing sector. Semis are lower after several earnings reports (NXP -10%) and software is getting lit up again with the Anthropic news. The weakness in Tech is expanding as we move toward the close. Just in time for AMD to report after the close.

Energy is reversing yesterday’s weakness as oil bounces, though the price action is relatively mild. News that the US shot down an Iranian drone that approached the USS Abraham Lincoln strike group in the Arabian Sea didn't push prices too much. Reports are out that the US is planning to issue general licenses to permit companies to pump oil in Venezuela. That’s added to a bunch of other geopolitical news: US-Iran talks taking place Friday, Russia breaking its no-retaliation pledge, India potentially halting Russian oil purchases. Consumer Staples is also a leader, with food and beverage names trading well.